Fed lending program not for insolvent oil drillers, Kaplan says
Source: Reuters
BUSINESS NEWS MAY 6, 2020 / 12:38 PM / UPDATED 18 MINUTES AGO
Fed lending program not for insolvent oil drillers, Kaplan says
SAN FRANCISCO (Reuters) - Insolvent or overly leveraged firms, including oil drillers and oil services firms, won’t be able to tap the U.S. central bank’s “Main Street” emergency lending program, Dallas Federal Reserve President Robert Kaplan said on Wednesday.
“It has to be a loan that would have passed already the bank’s lending standards,” Kaplan said in an interview on Yahoo Finance.
“If you are a company on the other hand that is more highly leveraged than that, concerned about insolvency, and other credit issues ... it’s not going to be able to access those programs, and there will be a substantial number of bankruptcies, restructurings, that are going to have to happen, because so much of (oil) production is being shut in,” he said.
Oil prices have plummeted during the coronavirus crisis as demand has dropped, and are now below what many U.S. producers can afford to operate at. Some are shutting off production altogether. Many entered the crisis with big debt loads.
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Read more: https://www.reuters.com/article/us-health-coronavirus-fed-kaplan/feds-lending-programs-arent-for-insolvent-oil-drillers-dallas-feds-kaplan-says-idUSKBN22I2JV